A&L;'s £7 million PPI fine is a good start

“The failings at A&L are the most serious we have found… which is reflected in the record PPI fine”

The Financial Services Authority (FSA) has fined Alliance & Leicester a record £7 million for “serious” payment protection insurance failings.

a&l;'s £7 million ppi fine is a good start

A&L;’s £7 million PPI fine is a good start

According to the regulator, A&L did not make it sufficiently clear to customers that PPI was optional, and even trained its staff to put pressure on customers who asked why PPI had been added to their loan quotation.

The bank also sought to find reasons to sell PPI without properly considering what customers needed.

A&L has accepted the fine, while group CEO David Bennett “apologised sincerely” for the bank’s shortcomings. A&L will now write a letter to all customers concerned, and is promising to reimburse anyone found to have been mis-sold a policy.

Record fine, but more action needed
The £7 million fine is by far the heaviest doled out by the FSA for PPI failings – the previous record was a £1 million penalty on HFC Bank – and is an early indication that it is making good on last week’s promise to finally get tough on the rampant PPI mis-selling that still blights the industry, three years after the regulator began its clampdown on the insurance.

“The failings at A&L are the most serious we have found… which is reflected in the record PPI fine,” says FSA enforcement director Margaret Cole. “It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.”

“This case shows that we will continue to step up the action we take when firms do not sell PPI properly. Customers should be able to rely on impartial advice based on their individual needs and demands.

“It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need. Firms cannot rely on paperwork sent out later as an excuse for unclear or misleading statements given on the telephone.”

Small change to A&L
However, it is worth pointing out that the £7 million fine is unlikely to make a massive dent in A&L’s PPI profits.

A report written by the Competition Commission in February found that banks were pocketing around £1,200 from a policy that costs them just £20.

According to the FSA, A&L sold 210,000 PPI policies to personal loan customers between January 2005 and December 2007 at an average price of £1,265.

Assuming A&L earned similar margins on PPI as the other major banks, they would have raked in around £248 million in profits during that period – 35 times more than the fine.

So while the fine is a welcome move in the fight to stamp out mis-selling, it’s possible the regulator may need to consider even more drastic measures in the future.

A&L & Equity Release

What Is Equity Release?

Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.

How Does Equity Release Work?

Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.

Equity Release and A&L as a form of Investment

Private equity is flush due to pandemic savings getting channeled towards investments and because of record levels of initial public offerings in the last year that have allowed PE funds to cash out of earlier investments.

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
Taylor Holt - 300x300

Written by
Taylor Holt
Estate Planning Expert

Taylor Is Our Resident Estate Planning Expert. He Knows That Everything Revolving Around Wills or Funeral Planning Can Be a Sensitive Subject That People Don’t Like to Discuss. But He Also Knows How Important It Is to Know All There Is to Know About It. Taylor Makes It His Mission to Spread Awareness About Estate Planning, and We Believe Everyinvestor Is the Best Platform to Do That.

Monique - 300x300

Written by
Monique Pittman
Pensions Expert

Monique Is Our Resident Pensions Expert. Many People Postpone Planning Out Their Pension, Thinking That Is Something They’ll Have to Worry Much Later in Life. Monique Knows How Important It Is to Start Planning Your Pension Early, and She Wants You to Know It Too!

Written by
Lisa Schilling
Insurance Expert

Lisa Is Our Resident Insurance Expert. She Knows How Important It Is to Be Ready for Any Scenario, Especially When a Family Member Is Involved. Nobody Likes Being Found Unprepared in a Tough Situation! Lisa Can Find the Best Insurance to Cover Your Every Need, Present and Future.

Doyle Edwards - 300x300

Written by
Doyle Edwards
Mortgages Expert

Doyle Is Our Resident Mortgages Expert. He Comes From a Long Line of Financial Gurus, and It Truly Shows. Despite His Young Age, There Is No Question He Cannot Answer When It Comes to Mortgages, and His Ability to See Outside of the Box to Find the Best Mortgage Deals Is Truly Impressive.

jason stubbs 300x300 1.jpg

Written by
Jason Stubbs
Equity Release Expert

Jason Stubbs Is a Specialist in the Equity Release Sector. He Enjoys Helping Older People Who Are Struggling Financially Get Out From Under Financial Pressure.

rachel w.jpg

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
francis.jpg

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
Mark Patterson

Written by
Mark Patterson
Mortgage Expert

Mark Patterson is a well-known expert in mortgages. He has been working as an expert for over 15 years, and he specializes in the UK mortgage market.
kath icon.png

Katherine Read
Consumer Affairs Writer

She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date

Nicola Date
Writer & Journalist

Nicola is a financial writer for EveryInvestor and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.